Rupee slips 11 paise to 95.84 as crude oil holds above $100 amid West Asia uncertainty

The rupee weakened by 11 paise to 95.84 against the U.S. dollar in early trade on Thursday, weighed down by a sharp rise in crude oil prices, firm U.S. bond yields and a stronger dollar amid continuing geopolitical uncertainty.

At the interbank foreign exchange market, the rupee opened at 95.84 against the American currency and remained under pressure through the session. The currency had closed Wednesday's session 11 paise lower at 95.73, a day after gaining 16 paise.

Forex traders said inflows of foreign capital were not enough to offset selling pressure in the domestic equity market and the strengthening of the U.S. currency. The dollar index, which measures the greenback against a basket of six major currencies, traded at 100.87, up 0.06%.

Brent crude futures, the global oil benchmark, were trading 0.97% lower on the day but remained elevated at $102.08 a barrel. That is well above the roughly $72 a barrel seen in late February, before the conflict involving Iran began. India imports more than 80% of its crude oil requirement, which makes the rupee particularly sensitive to sustained high oil prices.

According to analysts, oil prices that had begun stabilising over the past few sessions rose past $100 a barrel again after little diplomatic progress was reported in talks aimed at ending the West Asia conflict. U.S. and Iranian officials met on the sidelines of the United Nations General Assembly in New York.

In his address to the annual gathering, U.S. President Donald Trump said Washington might "annihilate" Iran if a deal could not be reached. The remark was made during his speech to world leaders, and its impact on energy markets is being closely watched by traders.

On the domestic equity market front, the Sensex declined 506.43 points, or 0.68%, to 74,321.82, while the Nifty fell 181.00 points, or 0.77%, to 23,266.15. Foreign Institutional Investors purchased equities worth ₹1,617.45 crore on a net basis on Wednesday, according to exchange data.

A weaker rupee has a mixed effect on the economy. It makes India's imports — including crude oil, fertilisers and electronics — more expensive, which can feed into retail inflation over time. It also raises costs for students studying abroad, travellers and businesses that pay for goods in dollars. Exporters, however, tend to benefit, as their earnings in foreign currency translate into more rupees.

The Reserve Bank of India monitors the currency market and intervenes from time to time to curb excessive volatility. The central bank has consistently said that its aim is to ensure orderly market conditions rather than to target any particular exchange rate.

Traders said the rupee's near-term direction will depend on the trajectory of crude oil prices, developments in West Asia, movements in the dollar index and the pace of foreign fund flows into Indian equities. They cautioned that exchange rates can swing through the trading day, and that the early-trade level of 95.84 may not hold by the close.

Currency markets across emerging economies have shown similar pressure in recent weeks, as investors have moved towards dollar-denominated assets perceived as safer during periods of geopolitical tension. India's foreign exchange reserves and relatively stable macroeconomic indicators have helped cushion the rupee against sharper declines so far.